When it comes to estate planning, ignorance is anything but bliss. Lots of people are probably familiar with estate planning as a concept, but do they understand just how important it is and do they even have plans of their own in place?
If you can’t confidently answer basic questions like these, you’re at risk of making a common estate planning mistake – or may have already done so. The good news is that your estate plan isn’t necessarily final until it needs to be executed. That means that if you’re reading this and realize you need legal assistance, you still have time to talk to a qualified and experienced estate planning attorney about your options.
Please take some time to read three the following five common estate planning mistakes and consider whether you’re at risk and how you can better protect yourself and your loved ones.
1. You Don’t Have a Real Plan
The first mistake most people make is not having a solid plan in place or not having one at all. This is incredibly risky because not having a will or trust leaves the division of your property up to the state’s laws during probate when you pass away. Sometimes, your property can end up in the hands of relatives you wouldn’t trust with it, and the courts alone can determine who will assume guardianship of your minor children.
If you are at the end of your life, lacking Advanced Directives can leave your doctors and loved ones in the dark about how you want to be medically treated. How far should doctors go to save or preserve your life? Leaving such choices up to your loved ones without your input can force them to make difficult decisions without truly understanding what you would have wanted.
2. You’ve Never Updated Your Plan
Estate planning shouldn’t be seen as a one-and-done deal. Just as you and your family grow and change over time, so too should your estate plan flex with the ebbs and flows of life. You might want to consider reviewing your estate plan on an annual or semi-annual basis, depending upon how much life has changed recently. You should certainly revisit your estate plan when you have new high-value assets (such as real estate) or have experienced a change in your family dynamic (marriage, divorce, births, and deaths).
By adjusting your plan with your life as you move on, you won’t have to worry about losing sleep over making sure your loved ones are protected should something happen to you.
3. You Haven’t Considered Long-Term Planning
Too many people don’t take long-term planning into account when it comes to their estate plan. This kind of planning maps out how you’ll be able to afford a nursing home or assisted living facility one day when you are elderly and need this level of care.
Planning for this is important because it’s anything but cheap. In California during 2021, the median monthly cost of a private room in a nursing home can be anywhere between $10,000-$15,000 per month. If you know you won’t be able to afford this kind of care with your savings later on in life, you may need to consider a Medicaid eligibility plan.
4. You Don’t Attempt to Minimize Estate Taxes
The estate tax exemption can exempt a large portion of your estate from taxation after you pass away. The current exemption is $11.58 million, which means the federal government will ignore this portion of your estate before taxes kick in. If your estate is well above this amount and you want to avoid taxation, proper planning prepared by an estate planning can help.
5. You’re Trying to Do This All on Your Own
Perhaps the biggest mistake you could make, next to not having an estate plan, is to try to come up with one all on your own. We can’t stress enough how easy it can be to end up with unintended consequences if you try to handle all of this without guidance from an estate planning attorney. Minor slip-ups in the language of your trust, for example, could unnecessarily expose your estate to punishing taxation.
At the end of the day, you risk leaving your family trying to pick up the pieces and put everything together during probate. This can lead to strife and conflict in the family, which may eventually lead to legal disputes among loved ones.